Airlines feel the pinch of 'exorbitant' fuel costs

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The latest aviation data for southern Africa indicate that scheduled capacity is 45.7% down in October on what it was in October 2019.
The latest aviation data for southern Africa indicate that scheduled capacity is 45.7% down in October on what it was in October 2019.
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  • The cost of jet fuel is one of the big burdens for air transport operators in southern Africa. One reason is because jet fuel is no longer produced in South Africa.
  • SAA acting CEO Thomas Kgokolo suggests having a regional airline group could help reduce costs.
  • Aaron Munetsi, CEO of the Airline Association of Southern Africa, described fuel charges as exorbitant.

Southern Africa's transport operators are facing several challenges, but among the chief concerns is the rising cost of jet fuel.

Jet fuel is now 116% more expensive than it was this time last year, which is further exacerbated by exorbitant fuel charges, says Aaron Munetsi, CEO of the Airline Association of Southern Africa (AASA).

Jet fuel is no longer produced in South Africa and it has to rely on imported stocks.

AASA held its 51st Annual General Assembly virtually on Thursday. There are currently 17 airline members and 35 so-called associate members, including infrastructure service providers, several oil companies, major aircraft manufacturers, engine manufacturers, ground handling companies, service providers, other industry associations and partners.

During a panel discussion at the AGA, South African Airways CEO Thomas Kgokolo said a regional airline group could be one solution to the rising costs associated with fuel.

Resource pooling

Maybe having a regional airline group can address the challenges like fuel costs, SAA's acting CEO Thomas Kgokolo said during a panel discussion.

"The market is very fragmented currently at a decision making, policy making and information sharing level and this fragmentation leads to connectivity being low on the continent. Support need not be cash, but could be a form of subsidy to ensure all airlines can benefit," he said.

"Resource pooling could, therefore, help to stimulate the market, but of course one has to be careful of competition boundaries. The post-pandemic recovery in Africa in terms of air traffic requires bold decisions. Our biggest challenge [in the region] is that we are now much more fragmented due to the impact of the pandemic and working in silos."

In September this year SAA and Kenya Airways said they want to look into a long-term goal of co-starting a Pan-African airline group. The two airlines signed a memorandum of co-operation in this regard.

While aviation demand in the southern African region is slowly returning, largely driven by vaccination rates, the industry is still counting the cost of the violence and political upheaval in South Africa, Munetsi said.

"Although buildings can be repaired and goods re-stocked, the economic cost in terms of lost jobs together with local and foreign investor jitters undermined travel confidence," he said. "It is not just a setback for those countries. It has had ripple effects right across the region."

The latest aviation data for southern Africa indicate that scheduled capacity is 45.7% down in October on what it was in October 2019 and almost 43% down on January 2020, just before the pandemic hit.

"Given that connectivity fell by more than 90% with the start of the lockdowns, this is a significant improvement. Nevertheless, by this measure - and given that airlines are trying to closely match supply with demand – it says our region is the second-worst affected worldwide after South East Asia, where supply is still over 70% down on pre-Covid-19 levels," said Munetsi.  

"Our performance is no doubt skewed by the radical downsizing of South African Airways and the exits of both SA Express and Air Namibia. At the same time, yields remain wafer-thin and there is very little elasticity in the market."

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